September 25, 2017 | Market Intelligence
NDC (New Distribution Capability) is a travel industry supported program launched by IATA (International Air Transport Association) for the development of a new, XML-based data transmission standard (NDC Standard). NDC allows for enhanced communication between the airlines, agents and technology companies. It focuses on creating one set of communication standards to support three initiatives: product differentiation, customized offerings and rich content.
How Does It Work?
There are two dimensions to NDC. Firstly, NDC is a standard. It’s a new communication methodology between travel agencies and airlines. It is an evolution from old technology (EDIFACT) toward a new technology which is XML-based. The second change is with respect to the workflow. In the legacy environment, GDS played the intermediary, constructing the offer. It used to get fares, schedules and availability from airlines and then construct the offer. As clients raise a request, the travel agent would use the GDS to propose pricing and routing solutions.
In the NDC environment, the intermediary is an aggregator and its role is to transmit the information back and forth from the travel agent to the airline. However, it is the airline, which is in charge of constructing the offer. Since the airline has the fares, schedules, availability, and ancillaries, it is in the right position to create offers. This workflow and process change is fundamental for the airline to be able to identify who the end consumer is.
This opens wide opportunities for personalization and ultimately, dynamic pricing. The airline will be able to access the customer name, frequent flyer details, and other relevant information the customer is willing to share on a voluntary basis. The airline will then construct an offer, fares only or including specific bundled ancillaries, and propose different forms of payment.
The other crucial evolution is the role of the technology intermediary, also known as the aggregator. In the legacy environment, the intermediary usually is a GDS and its function goes beyond connecting airlines and travel agents. The GDS enabled booking, payment, and issuance of ticket. In an NDC environment, the aggregator would be solely transmitting both shopping and ordering requests to the airline host environment.
Is It a Win-Win Situation for All?
Airlines: NDC will benefit the airlines as it will be easier for them to sell their products and services to whomever they want, whenever they want and through their channel of choice. This will help the airlines make better and relevant offers for end users to choose from the available offers as per their need.
Small TMC’s: With NDC offering better transparency of fare to providers, travel agents will play a vital role in targeting the right audience.
Travelers: NDC implementation benefits travelers by saving their time and money, and in facilitating contract negotiations. With NDC, travelers get a choice to select the best option available, along with the convenience while bookings, and control and visibility of the entire trip expenses.
IATA manages the NDC Certification for interested airline companies. This certification is provided to an individual organization which confirms the level and scope of that organization to provide the NDC application, send and receive NDC messages. This certification validates the NDC messages and the version of the applicable NDC schema. IATA is the only body which can provide NDC Certification. Some of the major airlines like American Airlines, United Airlines, Lufthansa, British Airways, Emirates etc. are already NDC certified.
Effect on Corporate Travel
Most travel buyers still seek in-depth knowledge about NDC and the implications it will have for their business activities. Current processes make it difficult for travelers and corporate buyers to compare airline ancillary products and the full-service options across multiple airlines. The NDC Standard will address many of these concerns. It also further enhances buying experience and addresses a lot of pain points around the lack of concise, accurate data on actual expenditure and reduced sense of leverage as far as costing is concerned.